iPhone 7 – The iPhone for Japan

As I wrote earlier today, Phil Shiller’s keynote mention of FeliCa was smart genius marketing that is already paying big dividends. There was even an English language press release which Apple has not done for a very long time, perhaps since the 2005 iTunes Store Japan rollout.

Japanese journalists filed stories and tweets all day after leaving the hands on area. In just 24 hours the iPhone 7 Japanese mass media theme went from “wait for 8” to “this is the iPhone for Japan.” FeliCa related company stock prices rose on the Nikkei in early trading adding to the good news.

FeliCa Fever
Lots of interesting details were reported by Tsutomu Ishikawa who first broke the FeliCa iPhone 7 story. JR East will release a Suica iPhone app later this year that will let users create a digital Suica card directly on iPhone, then link it to any registered Apple Pay credit card for easy Suica debit account provisioning and transit payment.

Suica functions not related to touch payment, and not directly supported in Apple Pay, will be available via the Suica app. However, it’s not clear if some Suica card only features such as on route express ticket purchases, seat reservations, etc., will be supported at the initial app release, or added later.

It’s also unclear if Suica compatible smart card transit systems PASMO and ICOCOA will work with Apple Pay Suica. A report from AV Watch Munechika Nishida says they are not compatible, but I think the initial snags will be addressed quickly, perhaps in time for the October rollout. Nishida san also points out an interesting “Express Mode” Wallet feature that allows the user to designate one Suica card to automatically check out without Touch ID confirmation, and that you do not even need to have iPhone 7 or iWatch 2 turned on for Express Mode to work. you don’t need to wake the device. I want to see this for myself when iPhone 7 goes on sale FeliCa Apple Pay goes online in late October.

One of the most interesting aspects of the iPhone 7 FeliCa/NFC Type-F support is that only iPhones sold in Japan support it. SIM-Free iPhone 7 phones purchased abroad will not support FeliCa, only NFC Type-A and Type-B. If you want to use the FeliCa flavor of Apple Pay, you must purchase iPhone 7, or Apple Watch Series 2, in Japan. More FeliCa Apple Pay info here and here.

How Big is This Anyway?
Despite the Apple Pay hoopla and FeliCa history going back to 2001, FeliCa transaction volume still has a lot of growth potential. The latest published Japanese Government figures from 2014 list 4 billion contactless transactions totaling 4 trillion JPY, nearly 40 billion USD.

Even at that size, FeliCa has been somewhat of a loss leader waiting for the big bang. Japanese economic leaders have been hoping the Tokyo Olympics in 2020 can be exactly that. Apple has a great history of ushering in the next big technology disruption that everything coalesces around, from the original Mac floppy to USB to iPhone. It will be interesting to see if Apple Pay in Japan starts the big disruption wave that crests during the Tokyo Olympics.

Japanese smart card financial volume on the left, number of transactions on the right